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What the New Credit Score Models Mean for Homebuyers

Starting in 2025, new credit scoring models will be used by lenders to
determine the creditworthiness of potential homebuyers. Fannie Mae and
Freddie Mac will mandate the adoption of the new FICO Score 10T and
VantageScore 4.0 by the end of the year. For those interested in buying a
home, these changes will impact their ability to purchase. The good news is
that these scores aim to be more inclusive and to show a fuller picture than
the old classic FICO scores did.

These new scores have been noted to have better accuracy, and consider
alternative credit data, as well as traditionally reported credit cards and car
payments. For example, VantageScore 4.0 allows borrowers to add on-time
payments for rent, utilities, and telecom bills. For those with limited debt or
who prefer to use cash, this is a big advantage when seeking credit.

The introduction of these new credit scoring models offers more opportunity
and accessibility to credit for more individuals. This is particularly true for
those with limited credit history or strong alternative credit data.

Additionally, the VantageScore 4.0 only requires one month of credit history
to generate a score, while FICO 10T still requires at least six months.

Overall, the launch of these credit scores is a significant step towards
hopefully allowing access to homeownership to more Americans. By
considering alternative credit, these scores may provide lenders a truer
picture of the ability of a potential homebuyer to pay their loan and extend
credit to those previously unable to qualify

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Home Search Frustration?

The best part of buying a new home is going out and touring homes. This is
especially true for first-time home buyers. As time goes on, however, it can
be frustrating when each home falls short of expectations. While it’s
important to be realistic about what is available and affordable, there can
be a temptation to settle when the right homes don’t pop up quickly.

When this happens, it’s important to take a step back and reevaluate the
criteria. Often buyers head out without a solid list of “must-have” and
“like-to-have” features in mind. If finding the right home is becoming
difficult, then this is the time to create or review these items. Consider
lifestyle as well as willingness to renovate or remodel. Is it important the
home is turn-key on day one, or is there a willingness and ability to make
changes after the sale?

Focus on the “must-have” list first. There could be a beautiful chef’s kitchen
on the “like-to-have” but if 4 bedrooms are critical for the size of the family,
the larger kitchen will not compensate for long. That said, if the hope is to
find a home with a pool, is there room to add the pool later?

Finding the right home is often a matter of timing. Patience is the best
advice. With the start of the new year, new listings are hitting the market
every day. The perfect home may not have been listed yet.

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Understanding the Difference Between Interest Rate and APR

One of the least understood aspects of obtaining a home loan is the difference between the interest rate and the APR (Annual Percentage Rate). At first glance, they sound like the same thing, but while they both impact the cost of the loan, they are two different aspects of the home loan program.

Home interest rates, or more commonly referred to as mortgage rates, are the actual cost of borrowing the money needed to buy the home. Lenders use the borrower’s credit score, income, loan amount, and other factors to determine their risk of lending the money. Then, they determine how much interest to charge on the principal loan amount.

On the other hand, APR provides an overall picture of the total cost of borrowing. It includes not only the interest rate cost, but also other costs and fees associated with the loan. Items such as origination fees, points, and mortgage insurance are all added to the total interest due over the course of the loan and then compared to the amount borrowed to determine the Annual Percentage Rate.

For potential borrowers, the APR allows them to compare the total cost of the loan among all available loans. One might offer a lower interest rate but once the fees and costs are included, it may end up costing more in the long run. Mortgage financing can seem complicated and confusing but by learning the terms and how they affect the loan, borrowers can make informed decisions about what loan program makes sense for their needs.

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What to Expect From a Listing Agent

You already know that the best way to sell your home, and for the most
profit, is to hire a listing agent. The fact is that people who sell using a real
estate agent make more profit and have a smoother transaction than those
who try to do it themselves. Yet often consumers don’t know everything the
listing agent does. Listing a home properly entails so much more than
putting a lockbox on the front door and slapping a sign in the yard.

The listing agent is your advocate and partner in the selling process. They
help guide you through the transaction, negotiate on your behalf, and work
with the buyers’ agents to get you the best deal possible. A good listing
agent will provide you with regular updates and input from showings. The
most important thing is to discuss and set expectations at the beginning.

Some sellers ask that their agent attend all showings. This is typical with
luxury properties, for example. But often they do most of their work behind
the scenes, encouraging offers, negotiating counter offers, working with
lenders and appraisers, handling loose ends and hiccups.

Once in a while, things don’t go well. The partnership becomes difficult or
impossible. Since almost all listings involve a reasonable time limit, you
may feel trapped or hopeless that there is a solution. In this case, you do
have options. First, if your agent works for a brokerage, call the managing
broker who can mediate, or if necessary, reassign your listing if needed.

Your agent is your partner. Be honest and open with your needs and
expectations. In this way, you can work together to sell your home quickly
and for the best price and terms possible.

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Save Money on Home Insurance

Home insurance is critical for homeowners. It protects you from unexpected
damage due to fire, wind, flood, and more. Unfortunately, the cost of these
policies can be very expensive and over the past few years, some
premiums have doubled or even tripled as more natural disasters hit the
country.

Fortunately, there are a few ideas on how to save money on premiums.
Here are  possible ideas to save money on your home insurance.

1. Bundle Policies – The easiest way to save money is to use the same
company for both auto and home. Most companies offer significant
discounts for doing all your business with them.

2. Increase Deductibles – Raising your deductible on all policies, even
just a little can save money overall. Consider how much you are able to
spend before relying on insurance and see how much you can save.

3. Home Security Systems – Most companies offer a nice discount for
home security, plus you have the added benefit of greater safety for you
and your family.

4. Good Credit – A higher credit score will likely give you a lower
premium. Be sure to ask your insurance company to review your score at
each renewal period.

5. Review Coverage – Do you have health insurance at work? Then
maybe you don’t need medical coverage through your auto policy? Review
your policies and make sure you need everything you’re paying for and
always seek the advice of your insurance agent.

6. Claim Free – Insurance is there to use, but you may not want to use it
for everything. If you have a $1000 deductible, for instance, it does not
make sense to submit a claim for damage that totals $1150. Staying
claim-free saves money.

Finally, shop around. At each renewal period, take the time to compare
leading companies and make changes when necessary. Switching
companies is very easy and can save you hundreds of dollars. Consult with
your insurance agent to find out if any of these ideas might work for you

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Fluctuating Interest Rates and Real Estate Investing

Interest rates tend to fluctuate over time. As a real estate investor, it’s
important to understand how changes in interest rates can impact the
housing market.

How Rising Rates Affect Home Buying
When interest rates rise, it generally slows demand in the real estate
market. Here’s why:
● Higher mortgage rates decrease purchaser purchasing power
● Potential homebuyers face increased monthly payments
● This leads to fewer buyers competing for the same properties
● Sellers have less leverage and negotiation power

Opportunities for Savvy Investors
However, a savvy real estate investor can find opportunities even in a rising
rate environment:
● Less overall demand means more negotiation leverage for buyers
● Motivated sellers may offer price reductions to attract buyers
● Investors can potentially acquire properties below market value
● For long-term investors, temporary rate fluctuations matter less than
the property’s income potential over time

Creative Financing Options
There are also financing options like adjustable-rate mortgages (ARMs) and
interest-only loans that can provide lower initial payments:
● ARMs allow buyers to take advantage of lower introductory rates
● Interest-only loans offer lower initial monthly payments
● These can make properties cash flow positive for investors

Key Takeaways
The key is keeping your real estate investment goals and financial position
in mind. While rising rates present challenges, they also create possibilities
for strategic investors.
● Maintain a long-term perspective on any property purchase
● Utilize diverse financing tools and structures
● Find opportunities to acquire properties below market value

By following these tips, you can make smart real estate buys even in
today’s rising interest rate environment.

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Don’t Overdo It When Decluttering to Sell Your Home

If you’re preparing your home to sell, you already know that it’s important to
declutter. A clean, tidy space allows potential buyers to see the beauty of
your home and to imagine themselves living there. But there is a fine line
between decluttering and denuding – removing too much can leave your
home looking cold and uninviting. Learn the difference and make sure your
buyers feel “at home” in your property.

Decluttering involves carefully removing excess personal items and décor
to create a clean and appealing space. On the other hand, some home
sellers go too far and end up with sterile rooms that lack any warmth or
personality. Buyers aren’t attracted by stark white walls with minimal
furnishing any more than they are by wall-to-wall clutter. Buyers want a
home with style and energy.

As you prepare for showings, start by removing extra “stuff.” Remove
excess items from tabletops, countertops, shelves, and personal items. You
do want a lived-in feel but allow some empty areas that make rooms look
larger and brighter. Once you’ve removed unnecessary items, strategically
return special décor and the occasional family picture or two.

Ultimately, the goal is to create a balance between decluttering and
maintaining the charm and personality of your home. Your buyers are
searching for a family home, so keep some “family” in the mix.

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Is Your Vacation Rental Ready For Winter Guests?

Owning a vacation rental, like an Airbnb or VRBO home, is a great way to
earn extra income. Much of the year, all these properties need is a way to
manage access and a cleaning service. When winter comes, however, it’s
important to add some extra care – both for the safety of your guests, but
also to keep the home in top condition.

Here is a quick checklist for anyone managing a vacation rental this winter:

· Inspect, Repair, and Maintain Heating Systems – Before
temperatures drop, hire a professional to inspect and adjust heating
systems. Replace filters to increase efficiency.

· Seal Drafts and Insulate – Short term tenants will want to stay warm
and don’t care about your heating bills. An afternoon spent
weatherstripping or caulking can save hundreds of dollars each month.

Also consider adding extra insulation to the attics, walls, or basements to
keep the warm air inside.

· Have Clear Expectations – Leave clear instructions for guests.
Discuss how to protect pipes from freezing, how to report issues if they
arise, and have an emergency contact available at all times. Explain how to
turn off water properly, if necessary, and any other precautions required.

Always make sure you have adequate liability insurance as well. Winter
can cause its own share of challenges for vacation rentals. Proper
preparation and maintenance will ensure your vacation rental is a
money-maker and not a money-pit this winter.

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Selling During the Holidays

Selling your home during the holidays requires a balance between family
celebrations and public access. While your home may look its best, it can
be challenging to accommodate the last-minute showings. Communication
with your agent is critical and with proper planning, you can minimize the
disturbances while still allowing potential buyers to view your property.

· Showing Windows – Working around your holiday schedules, as
well as your agent’s, state clearing in your real estate listing the show times
you will allow. An example might be a 4-hour window on weekends or a
2-hour time frame weekday evenings.

· Advance Notice – State clearly that all buyers must reach you prior
to showing up. Of course, some will still stop by, but you can minimize the
impact by asking for advance notice.

· Online Tools – The more pictures and videos the better. If your
potential buyers can view your home online, you are more likely to get the
right buyers setting appointments. You may get fewer showings, but they
will be the right ones.

· Clean-up Stations – You want your home to look festive, but this can
lead to clutter. Keep clean-up bins in strategic locations so you can easily
hide unnecessary items on short notice.

Again, communication is more important than ever during the holiday
season. You are in control. Set realistic privacy boundaries and hold to
them. This allows you to showcase your home in its best light, without the
disruption to your family traditions.

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Market Outlook

There’s been some concern lately about another housing market crash.
Maybe you’ve read articles linking today’s environment with the Market
Meltdown of 2008. Even with the talk of recession, this real estate market is
very different and that means that most experts do not expect a crash, just
a normal ebb-and-flow slowdown. There are some significant differences in
today’s situation:

Heading into the 2008 crash, loans were very easy to find. Almost anyone
could qualify for a loan with zero down payment and lower FICO scores.
The lending industry was taking huge risks, and this pushed home prices
higher, artificially. With stricter lending policies in place, not only do
borrowers need to qualify properly, but appraisals are based on true value,
avoiding over-inflated prices.

Housing Supply
Another difference is the housing supply. As home prices soared, so did the
number of homes for sale. Currently, there is still a shortage of available
inventory for the buyers still looking for a new home.

Equity Levels
Another huge difference is near record equity for most homeowners. The
strong housing market during the pandemic pushed home values higher
than ever before. Contrast this to the Market Meltdown era of short sales
and foreclosures, and it’s clear that most sellers can still afford to negotiate
and reap a healthy gain in the process.

What this means to you
The bottom line is that if you are a buyer looking to purchase or a seller
ready to move, there is no reason to wait or worry that there is a crash on
the horizon. The frantic pace of the market has slowed, interest rates have
risen, but opportunities are still available in this market.